Free Response in Opposition to Motion - District Court of Arizona - Arizona

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Sid Leach (#019519) Monica A. Limón-Wynn (#019174) SNELL & WILMER L.L.P. One Arizona Center 400 E. Van Buren Phoenix, AZ 85004-2202 Telephone: (602) 382-6372 Attorneys for Plaintiff Hypercom Corporation [email protected] [email protected] [email protected] IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Hypercom Corporation, Plaintiff, vs. Omron Corporation, Defendant. No. CV 04-0400 PHX PGR HYPERCOM CORPORATION'S RESPONSE IN OPPOSITION TO OMRON CORPORATION'S MOTION IN LIMINE NO. 3 TO BAR TESTIMONY BY HYPERCOM'S EXPERT, LAURENCE PRETTY

Hypercom Corporation, through counsel, hereby files its Response to Omron Corporation's Motion in Limine No. 3 to Bar Testimony by Hypercom's Expert Laurence Pretty and states as follows: MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION Under Rule 702 of the Federal Rules of Evidence, [i]f scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise...". This is a case that involves patent litigation procedure and practice, which is an area outside the province of an average lay juror. Specialized knowledge concerning the practice and procedure for evaluating patent infringement as part of a pre-filing investigation before filing a patent infringement action will assist the jury in understanding the evidence concerning Verve and Omron's lack of probable cause, and in determining facts in issue
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concerning the lack of probable cause, malice, and Omron's state of mind on the question of whether punitive damages are appropriate. Mr. Laurence Pretty is qualified as an expert in this area by knowledge, skill, experience, training, and education, and his testimony can assist the trier of fact in understanding the baseless nature of the lawsuits that were filed against Hypercom, Omron's efforts to distance itself from the malicious lawsuits by not being named as a party to the lawsuits, and why Omron knew or should have known that the lawsuits filed by Verve asserting infringement of Omron's patents were baseless. It is not uncommon in patent cases to have expert testimony from patent procedure experts. See, e.g., Amsted Industries Inc. v. Buckeye Steel Castings Co., No. 91 C 1179, 1992 U.S. Dist. LEXIS 18660, at *8 (N.D. Ill. Dec. 8, 1992) ("The Federal Circuit has approved the use of a patent attorney to testify as an expert, to assist the trier of fact in the reasonable royalty determination."), aff'd in part, vacated in part on other grounds, 24 F.3d 178 (Fed. Cir. 1994) (remanded for redetermination of damages); Dow Chemical Co. v. American Cyanamid Co., 816 F.2d 617, 620 (Fed. Cir.) ("Trial to the district court sitting without a jury lasted seven days, during which time the district court heard the testimony of one of the Dow patentees, Dr. Ben Tefertiller, as well as two chemical experts on behalf of Cyanamid and an expert in the field of patent practice on behalf of Dow."), cert. denied, 484 U.S. 849 (1987); Advanced Technology Materials, Inc. v. Praxair, Inc., No. 03 CV 5161 (RO), 2006 U.S. Dist. LEXIS 20767, at *14 (S.D.N.Y. April 18, 2006) ("Defendant offers the declarations of its technical expert, Dr. Frank J. Fronczak, tenured professor of Mechanical Engineering at the University of WisconsinMadison, and of its patent procedure expert, Gerald J. Mossinghoff, who, among other things, was Commissioner of Patents and Trademarks from 1981-85. Plaintiff has submitted the declarations of Dr. Alexander Glew and Gary Frank, its technical experts, and Gerald Bjorge, its patent procedure expert.") (footnotes omitted), aff'd, 2007 U.S. App. LEXIS 9177 (Fed. Cir. April 19, 2007); Zollinger v. Qualitex, Inc., No. 84-1630, 1989 U.S. Dist. LEXIS 369, at *6 (E.D. Pa. Jan. 17, 1989) ("David Garrison, Esquire, defendants' patent practice expert, interpreted the language of Claim 1...".), aff'd without
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opinion, 889 F.2d 1099 (Fed. Cir. 1989). "[H]ere a jury will be called on to make various factual determinations, some turning on the custom and practice of patent lawyers. Because none of these questions will themselves be the subject of court instructions, they may properly be a subject of expert testimony by a patent lawyer." Amsted Industries Inc. v. Buckeye Steel Castings Co., 1992 U.S. Dist. LEXIS 18660, at *8.

6 II. 7 8 9 Omron entered into an agreement with Raymond Galasso, a member of the law 10 firm of Simon, Galasso & Frantz, to provide Omron's patents to Raymond Galasso's shell 11 corporation Verve LLC so that patent infringement lawsuits could be filed against 12 Hypercom in which Verve LLC was named as the plaintiff. Under the deal with Mr. 13 Galasso, Omron would receive approximately 50% of the net proceeds received from the 14 malicious lawsuits filed against Hypercom. The evidence indicates that Omron's U.S. 15 representative Mr. Tetsuyuki Nakano sent a series of memos back to Omron's 16 headquarters in Japan recommending that Omron proceed with the deal, stating that 17 Omron would have "no risk" since Omron would not be a party to the lawsuits. Mr. 18 Nakano's memos sent to Japan also show that Omron was aware from the outset that 19 Hypercom would be one of the targets of the lawsuits. 20 Omron aided Verve by executing documents for the purpose of distancing itself 21 from the malicious lawsuits. Omron signed one page "assignment" documents that Verve 22 could file with the U.S. Patent and Trademark Office as public records. The recorded one 23 page "assignment" documents indicated that all right, title and interest in the Omron 24 patents was transferred to Verve, and Omron retained no interest in the patents or control 25 over Verve. The testimony at trial is expected to show that these documents were false. 26 The actual agreements between Omron and Verve were concealed from Hypercom and 27 the other targets of Omron and Verve's scheme. The concealed documents showed that 28
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LEGAL ARGUMENT Hypercom's Expert Will Offer testimony That Will Be Of Assistance To The Trier Of Fact

A.

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Omron retained substantial rights in the patents, and that Verve did not have standing to file the malicious lawsuits in its own name without naming Omron as a party to the lawsuits. It will assist the jury to hear expert testimony to aid them in understanding the evidence relating to whether Omron should have known that it must be named as a party to the malicious lawsuits, and to understand Omron's motive for aiding and abetting Verve's concealment of the substantial rights that Omron actually retained under the patents in the secret agreements that Verve attempted to conceal from Hypercom. It will assist the jury to receive expert testimony concerning patent litigation practice and procedure, and to hear Mr. Pretty's opinions concerning Omron's giving its patents to a shell corporation, which was controlled by Mr. Galasso -- the head of the intellectual property practice in the Simon, Galasso & Frantz law firm that filed the lawsuits on Omron's patents, so that Omron would not be named as a party to the malicious lawsuits. This will assist the jury in determining whether the way in which Omron structured the deal with Verve was a subterfuge and an attempt by Omron to shield itself from liability in a scheme that Omron knew or should have known was wrong. Omron's witnesses have admitted that Omron made no pre-filing investigations at all before the patent infringement lawsuits were filed against Hypercom. Mr. Pretty's testimony will assist the jury in better understanding the evidence concerning Omron's failure to do any pre-filing investigations concerning the patent infringement lawsuits filed against Hypercom on Omron's patents. Omron has repeatedly argued that the deal that Omron did with Verve was perfectly normal and ordinary. Omron is expected to argue to the jury at trial that Omron had Verve enforce the Omron patents because Omron did not have the expertise to do so. Mr. Pretty's expert opinions are directly relevant to Omron's position, and are relevant to rebutting Omron's arguments and expected testimony at trial. Mr. Pretty testified as an expert at the Verve trial. The transcript of his direct testimony during the Verve trial is attached hereto as Exhibit 1. His testimony was
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deemed admissible at the Verve trial, and was of assistance to the trier of fact. In this case, his specialized knowledge will assist the trier of fact to understand the evidence as well. Many of Omron's arguments are based upon assumptions about specific testimony that Mr. Pretty "may" give at trial. "Evidence should not be excluded in limine unless it is clearly inadmissible on all potential grounds." Amsted Industries Inc. v. Buckeye Steel Castings Co., at *1-2. Omron's arguments can be better addressed by objections at trial to specific questions and answers, and are not an appropriate basis for complete exclusion of Mr. Pretty's testimony based upon a motion in limine. Amsted Industries Inc. v. Buckeye Steel Castings Co., at *2 ("Evidentiary rulings should be deferred until trial so that questions of foundation, relevancy and potential prejudice may be resolved in proper context."). Motions in limine are disfavored because "[i]n many instances, prior to trial, the court has no way of knowing (1) whether any or all of the challenged evidence will be offered at trial, (2) if so, for what purpose or purposes, (3) whether, if offered, some or all of such evidence might be admissible for one or more purposes and (4) if admissible, whether its probative value might be outweighed by prejudicial effect." Hess v. Inland Asphalt Co., 1990 WL 51164, at *1 (E.D. Wash. Feb. 20, 1990). B. Hypercom's Expert's Testimony Is Not Objectionable Because It Embraces An Ultimate Issue To Be Decided In The Case Omron argues that each of Mr. Pretty's expert opinions consists of inadmissible conclusions of law. This argument has no merit. Mr. Pretty will not be testifying to the jury about what the law is. Instead, the Court will instruct the jury on the law. Similar arguments have been rejected by courts on motions in limine seeking to exclude an expert's testimony in its entirety. Amsted Industries Inc. v. Buckeye Steel Castings Co., at *9-10. "Excluding all the testimony of a witness -- rather than of a certain subject matter - is an extraordinary measure." Id. at *7. In essence, Omron's argument appears to be that Mr. Pretty's opinions are expressed as opinions on ultimate issues. However, under Rule 704(a) of the Federal Rule of Evidence, such testimony "is not objectionable because it embraces an ultimate issue to
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be decided by the trier of fact." C. Omron's Position Concerning The Admissibility Of Hypercom's Expert Testimony Cannot Be Reconciled With Omron's Position Concerning The Admissibility Of The Opinions Of Omron's Expert Charles Berman Omron's expert Charles Berman has similar qualifications to Hypercom's expert

5 Laurence Pretty. Omron's expert Charles Berman offers an opinion concerning whether a 6 specific Hypercom product infringes an Omron patent. Omron's expert Mr. Berman is not 7 offered as a technical expert. He is a lawyer. Thus, it is difficult to see how Omron can 8 argue that Mr. Pretty's opinions can be excluded in their entirety. 9 Mr. Pretty's opinions are relevant because his opinions are based upon the 10 Hypercom products that were actually accused of infringement by Verve. Mr. Pretty will 11 offer testimony to assist the trier of fact in understanding the lack of probable cause for 12 Verve's patent infringement lawsuits against Hypercom. In explaining the basis for his 13 opinions, Mr. Pretty will go through the specialized procedure that one must perform in a 14 pre-filing investigation of whether or not Hypercom's products could be accused of patent 15 infringement. His testimony will also assist the trier of fact in appreciating and 16 understanding why Omron should have known that the patent infringement claims against 17 the Hypercom products actually accused of infringement in the lawsuits filed against 18 Hypercom were baseless, especially in view of the information that was known to Omron 19 at the time, and in view of the information that Hypercom provided to Omron to 20 demonstrate to Omron the reasons why Hypercom did not infringe any of the Omron 21 patents that Verve had asserted against Hypercom. 22 In contrast to the infringement opinions and analysis offered by Omron's expert 23 Charles Berman, Hypercom's expert Laurence Pretty bases his opinions upon the 24 Hypercom products that were actually accused of infringement and which were the basis 25 for the malicious lawsuits filed against Hypercom. The problem with Omron's expert 26 Charles Berman, is that he offers opinions based upon his analysis of a product that was 27 not accused of infringement, and based upon Mr. Berman's own after-the-fact 28
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investigation using information that was not known to Omron at the time. In addition, in the pretrial statement, Omron has admitted that Omron did not conduct any pre-filing investigation at all. Thus, Omron's expert's opinions are not relevant to the issue of probable cause concerning the Hypercom products accused of infringement, or to the issue of Omron's state of mind. III. CONCLUSION For the foregoing reasons, Hypercom Corporation respectfully requests that the Court deny Omron's Motion in Limine to Bar Testimony by Hypercom's Expert Laurence Pretty. RESPECTFULLY SUBMITTED this 30th day of April, 2007. SNELL & WILMER L.L.P.

By s/ Sid Leach Sid Leach Monica A. Limón-Wynn SNELL & WILMER L.L.P. One Arizona Center Phoenix, AZ 85004-2202 Attorneys for Plaintiff Hypercom Corporation

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CERTIFICATE OF SERVICE I hereby certify that on April 30, 2007, I electronically transmitted HYPERCOM CORPORATION'S RESPONSE TO OMRON CORPORATION'S MOTION IN LIMINE NO. 3 TO BAR TESTIMONY BY HYPERCOM'S EXPERT, LAURENCE PRETTY to the Clerk's Office using the ECF System for filing and transmittal of a Notice of Electronic Filing to the following ECF registrants: David P. Irmscher John K. Henning, IV BAKER & DANIELS 300 N. Meridian Street, Suite 2700 Indianapolis, IN 46204 Phone: 317-237-1317 Fax: 317-237-1000 [email protected] [email protected] Attorneys for Defendant Omron Corporation A. Colin Wexler Matthew A.C. Zapf GOLDBERG KOHN BELL BLACK ROSENBLOOM & MORITZ, LTD. 55 E. Monroe Street, Ste. 3300 Chicago, IL 60603 Ph. 312-201-4000 Fax: 312-332-2196 [email protected] [email protected] Attorneys for Defendant Omron Corporation s/ Sid Leach H. Michael Clyde Todd R. Kerr PERKINS COIE BROWN & BAIN P.A. 2901 N. Central Ave., Ste. 2000 Phoenix, AZ 85012-2788 Ph.: 602-351-8000 Fax: 602-648-7000 [email protected] [email protected] Attorneys for Defendant Omron Corporation

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